Created: 9/14/1989

OCR scan of the original document, errors are possible

Yugoslavia 's economic problems are exacerbatingnsions and threatening Belgrade with its second change of'government in lessear. The chances are about even that Premier Marhoric wilt be ousted or resign in the next few months, forced out by widespread anger over his failure toercent inflation and regional opposition to his market-oriented reforms. His departure would virtually rule out meaningful economic reforms for the foreseeable, future and strengthen Serbian leader Milosevics hid for greaterf

Markovic is unlikely to have enough success in controlling inflation to rebuild his position. His anti-inflationreform and tight monetarymany of the problems underlying Yugoslavia's hyperinflation, but lack of support from ihe republics denies Belgrade the power to implement them. Public patience is wearing ihin. as is evident in sporadic strikes and protests against the government's ineptnes* and falling living standards. Trade unions have warned of broader labor unrest and some regional officials have demanded Markovic's raighationjf he docs not soon make progress in halting the price spiral. J| V

Markovic could probably buy time by caving Into demands to use more direct measures against inflation, including wage and price controls. Suchhis expected vim to the US and meeting with President Bush thiswould quiet critics temporarily. But Markovic has vowed not to abandon his policies; ifree hand he is as likely to make good on his promise to resign, possiblyegislalivc^Mion on inflation late this month, as he is to make concessions.HHHV

Regional Tensions Kisi.-tg

Debate over Markovic's fate and his reform policies has split Increasingly along republic lines, reflecting regional economic interests and Serbia's attempts to exploit diffkullics. The southern republics, led by Serbia, have charged thatroat, and his northern allies ore insensitive to the disproportiojuiieimpaci of inflation and reform on the less developed south fl

The more market-oriented northern republics of Croatia and Slovenia support Markovic's charge that efforts to curb inflation are being blocked by Serb politician* more interested in toppling the government lhan working together. They citelan to raisepatriotic loan" for its own development as evidence.


September IW

Original document.

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